I wasn’t going to respond but felt the need to write one because there is so much misinformation about modern monetary theory even among the left, it is driving me insane.
The most important point to note here is that: no, dollar hegemony has nothing to do with how the US can give everyone free healthcare and solve poverty and homelessness. These are two separate concepts that kept getting muddied together by some misinformed concepts like the “petro-dollar” I keep seeing peddled among the anti-imperialist crowd.
To be clear, I am not disagreeing with the anti-imperialist position on the video, and I will discuss why it is difficult for the Global South to implement currency sovereignty, but it is completely wrong to say that the US can only fund its spending because the US dollar is the global reserve currency.
The authority on this subject is Michael Hudson and I implore everyone to read Super-imperialism to understand how dollar hegemony actually works (and it has little to do with petro-dollar, though petro-dollar is one small component of it). This should be essential reading for every leftist by now so people don’t keep regurgitating right wing neoclassical nonsense, like “inflation is only caused by excessive money supply” as mentioned in the video, which is flat out wrong.
Let’s break this down:
Modern monetary theory clarifies a very important concept about fiat money and debt, which is that any government with monetary sovereignty (i.e. currency that is not pegged to gold or any other currency, and has the ability to print its own money e.g. not state/local governments or EU member states) can spend domestically as much as it could without leading to inflation, so long as there are available labor, resources and technology.
(By the way, the USSR under Stalin practically did this which led to unprecedented economic growth and hundreds of new cities that cropped up within a single generation, one that threatened to overtake the US, until Khrushchev complained about the “national debt” being too high and the Soviet government defaulted on its bonds in 1957, which was one of the reasons that led to the stale Soviet economy that followed in the 1960s and 70s and its inevitable downfall in the 80s. Why? Because the Soviet government stopped spending enough to adequately drive its large economy.)
This has nothing to do with dollar hegemony, in which the US dollar as a global reserve currency allows the US government to print as much as it wants to get “free lunch” overseas. Michael Hudson detailed this in his book Super-imperialism: the entire reason it works here is because foreign central banks do not have any other places to utilize/spend the surplus dollars, and so the US treasury bonds acted as a vehicle to absorb these excess dollars spent overseas, thereby allowing the US to keep spending overseas without limits, because all those extra dollars are “recycled” back to the US treasuries and “deleted” there anyway, effectively giving them “free lunch” from the developing world. In other words, foreign countries export their goods and services (made by their own labor and resources) and receive junk papers in return, which are then absorbed by the US treasuries to earn a few % of interests long-term. The recycling process will continue to work until the rest of the world de-dollarize, which is why it is such a main theme when it comes to anti-US imperialism these days.
So, no, the US dollar does not need to be the global reserve currency, nor does it need dollar hegemony to spend domestically to re-industrialize, give full employment for everyone, and provide free healthcare, housing and other public utilities for everyone. It doesn’t need to tax billionaires to pay for its spending, because the US government is itself the currency issuer, why does it need to collect the money it spent in the first place?
The reason that this is not being done is purely political sustained by a right wing economic ideology (the Chicago school) that says, no, the government cannot spend beyond its means, much more than it earns, so we have to administer austerity and cut back social spending and welfare because we owed so much “debt” to China and scaremongering quotes like “our children have to repay our trillions of dollars worth of debt owed to China!!”.
In reality, the $800 billion dollar “national debt” that China “lent” to the US were simply the surplus dollars China earned after exporting goods to the US, and because China runs a trade surplus with the US (after importing from the US, and being prevented from buying up critical American industries), it will always accumulate dollars in the end. So, without any places to use these dollars, they “lent” that money to the US treasuries to earn a few % of interests every year. It’s effectively junk papers for China, which is why China has stopped buying US treasuries ($1.2 trillion down to $800 billion) and spent them on Belt and Road projects instead (which comes with its own problems, but this is beyond the scope of our discussion today).
So, what prevent countries from the Global South from doing that? It is important to understand the neo-colonial history following WWII, during which global institutions were set up to prevent the developing world from attaining their economic sovereignty.
For example, countries borrowed dollar (from the IMF) or pegged their currency to the dollar, for instances, will always be indebted to the dollar and need a dollar reserve to defend their currency. This is actually one of the points the video was correct about.
Furthermore, US imperialism prevented food and energy self-sufficiency in the Global South. With World Bank explicitly demanding the Global South countries to plant export crops rather than prioritizing on food security, and with energy such as oil and gas being sold in US dollar (as you can see, the petro-dollar only plays one part in the entire imperialist process that stifles economic growth in the Global South).
Finally, GATT (the precursor of WTO) forces Global South countries to open up their domestic market for multi-national corporations to enter and to be flooded with cheaper foreign goods, thus devastating their local industries along the process.
All of these factors: high external debt (especially dollar debt), unable to attain food and energy self-sufficiency are what created problems for the Global South countries from fully utilizing their monetary sovereignty. It has nothing to do with needing to be the global reserve currency to spend domestically.
And if you understand all that, then you’d understand why sanctioning Russia was doomed to fail: a country with very low external debt, is fully capable of feeding and providing energy domestically, is very difficult to be conquered with US dollar monetary imperialism. Unfortunately most Global South countries do not have the same condition, and only with full scale de-dollarization can we move past that.
Still, this doesn’t mean the US cannot spend an infinite amount of money to give healthcare and infrastructure to its people. Even if the US loses its dollar hegemony status, it can still do all that as long as they can re-industrialize with adequate labor, resources and technology at home. Don’t fall for the propaganda that you have to tax rich people before the government can give you good stuff - the government can always give you good stuff, they just choose to give it to the rich people instead.
